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Ira Green, Inc. v. Military Sales & Service Co.

United States Court of Appeals, First Circuit

December 19, 2014

IRA GREEN, INC., Plaintiff, Appellant,
v.
MILITARY SALES & SERVICE CO., Defendant, Appellee

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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. Hon. John J. McConnell, Jr., U.S. District Judge.

Christine K. Bush, with whom Craig M. Scott, Anastasia A. Dubrovsky, and Scott & Bush Ltd. were on brief, for appellant.

Brian C. Newberry, with whom Peter C. Lenart and Donovan Hatem LLP were on brief, for appellee.

Before Howard, Selya and Stahl,[*] Circuit Judges.

OPINION

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SELYA, Circuit Judge.

This is a bruising commercial dispute between business rivals. When the eponymous plaintiff, Ira Green, Inc. (Green), repaired to the federal district court, it charged the defendant, Military Sales & Service Co. (MilSal), with tortious interference and defamation. After prodigious discovery and an acrimonious trial, the jury returned a take-nothing verdict. The district court denied Green's post-trial motions and, adding insult to injury, corrected a portion of the judgment favorable to Green and awarded costs to MilSal. Green appeals, presenting a florid palette of claimed errors.

These claims of error include an issue of first impression in this circuit. In 2009, the Civil Rules were amended to enshrine a party's right to demand a jury poll. See Fed.R.Civ.P. 48(c). Here, Green requested such a poll, but did not receive one. Still, a party who requests a jury poll must act reasonably to preserve its rights and, in the circumstances of this case, Green did not do so. Consequently, its claim of error is unavailing.

The remainder of Green's asseverational array is more prosaic. Upon careful perscrutation, we discern no reversible error and affirm the judgment below. The tale follows.

It's Not Easy Being Green

Green is a Rhode Island corporation engaged in the marketing and distribution of military insignia and tactical products (such as headlamps, carabiners, and weather-resistant paper). Its primary customer is the Army and Air Force Exchange Service (AAFES), which operates retail shops (known as post exchanges) at military bases. MilSal, a Texas corporation, plies the same trade from a different angle. Acting as a manufacturer's representative, it brokers direct sales to divers customers including AAFES.

In 2010, Green acquired the assets of Brigade Quartermasters, Ltd. (Brigade), which had been AAFES's largest supplier of tactical gear. As part of the transaction,

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AAFES agreed to assign to Green the shelf space previously reserved for Brigade's products at its exchanges and Green, in return, ensured a continuous flow of the tactical products theretofore sold by Brigade. AAFES began issuing replenishment orders to Green, which obtained the requisitioned products from its suppliers (formerly Brigade suppliers) and filled AAFES's purchase orders.

Around the time that this arrangement started, MilSal hired Cliff Vaughn (an erstwhile Brigade employee). Vaughn gave MilSal confidential information about Brigade's costs and pricing arrangements. Armed with this data, MilSal began courting certain of Brigade's suppliers, touting the benefits of a direct-sales model.

In short order, MilSal wooed away several suppliers and persuaded them to stop filling Green's orders. AAFES began ordering directly from the suppliers, including J.L. Darling Co. (Darling), a manufacturer of weather-resistant paper called Rite in the Rain. Green fought back. It started marketing STORM SAF (a less-expensive alternative to Rite in the Rain) to AAFES.

The encroachment of STORM SAF on sales of Rite in the Rain ruffled MilSal's feathers. In May of 2011, a MilSal executive, Scott Hance, sent an e-mail to Paul Atherton, an AAFES hierarch. Hance's e-mail claimed (falsely, in Green's view) that STORM SAF " completely dissipates in water within a matter of seconds" and could compromise warzone missions. Even though AAFES's own tests found the two brands of paper to be of " equivalent" quality, orders of STORM SAF dwindled.

Nonplussed by MilSal's tactics, Green shifted the battlefield from the marketplace to the courtroom. Invoking diversity jurisdiction, see 28 U.S.C. § 1332(a), Green sued MilSal in the United States District Court for the District of Rhode Island. Its complaint alleged defamation and tortious interference with both contractual and business expectancies. Based on information acquired during protracted discovery, MilSal counterclaimed. These counterclaims came to naught: one was dismissed at the pleading stage, and the rest were jettisoned on summary judgment.

After eight days of trial, the jury rejected Green's claims for tortious interference. On the defamation claim, the jury sent a mixed message: it determined that MilSal " ma[d]e false and defamatory statements concerning Ira Green and/or its STORM SAF products," but then determined that no damages flowed from this disparagement.

The clerk of court entered judgment for MilSal on the tortious interference counts and for Green on the defamation count. MilSal moved to amend the judgment because, absent damages, a required element of the defamation claim had not been proven. Agreeing with MilSal's reasoning, the district court entered an amended final judgment for MilSal on all the tried counts and for Green on the counterclaims.

Green moved for a new trial, and MilSal moved for an award of costs. As part of its motion, MilSal revealed for the first time that it had paid over $10,000 in counsel fees to enable it to secure the testimony of a witness. Green effectively amended its new trial motion to include a claim based on this revelation.

The district court denied Green's new trial motion and taxed costs in favor of MilSal. This timely appeal followed.

The Gold Standard

In appellate litigation, the standard of review is tantamount to the gold standard. Thus, we pause at the outset to limn the standards of review that are implicated by

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Green's challenge to the district court's denial of its motion for a new trial.

Green brought its new trial motion under Federal Rule of Civil Procedure 59(a). Under this rule, " [a] district court may set aside the jury's verdict and order a new trial only if the verdict is against the law, against the weight of the credible evidence, or tantamount to a miscarriage of justice." Casillas-Díaz v. Palau, 463 F.3d 77, 81 (1st Cir. 2006). We review the district court's disposition of a new trial motion for abuse of discretion. See Crowe v. Marchand, 506 F.3d 13, 19 (1st Cir. 2007). An abuse of discretion will be found whenever a reviewed ruling is based on an error of law. See United States v. Connolly, 504 F.3d 206, 211-12 (1st Cir. 2007).

Green's motion posited that a new trial is obligatory because of a series of embedded legal errors. We analyze separately each of these cascading claims of error.

Some of Green's claims of error relate to the admission of evidence. Where, as here, objections have been preserved, a district court's evidentiary rulings are evaluated for abuse of discretion. See United States v. Zaccaria, 240 F.3d 75, 78 (1st Cir. 2001). Even if an abuse of discretion occurs, a new trial is not required unless the error in admitting evidence " had a substantial and injurious effect or influence upon the jury's verdict." Gomez v. Rivera Rodríguez, 344 F.3d 103, 118 (1st Cir. 2003); see Fed.R.Civ.P. 61.

Green's new trial motion also relies on assignments of instructional error. When examining preserved claims of instructional error, we afford de novo review to " questions as to whether jury instructions capture the essence of the applicable law, while reviewing for abuse of discretion . . . the court's choice of phraseology." DeCaro v. Hasbro, Inc., 580 F.3d 55, 61 (1st Cir. 2009). The district court must give a jury instruction on a material issue if the evidence presented at trial could plausibly support a finding for either side. See Wilson v. Mar. Overseas Corp., 150 F.3d 1, 10 (1st Cir. 1998); see also Faigin v. Kelly, 184 F.3d 67, 87 (1st Cir. 1999) (explaining when a refusal to give a requested instruction is reversible error).

In part, our decision on the jury-poll issue raised in the new trial motion implicates the plain-error doctrine. See United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). To prevail on plain-error review, an appellant must show " (1) that an error occurred (2) which was clear or obvious and which not only (3) affected the [appellant's] substantial rights, but also (4) seriously impaired the fairness, integrity, or public reputation of judicial proceedings." United States v. Duarte, 246 F.3d 56, 60 (1st Cir. 2001). The appellant must carry the devoir of persuasion as to each of these four elements. See United States v. Vega Molina, 407 F.3d 511, 521 (1st Cir. 2005).

Singing the Blues

Green asserts that the court below was too free in admitting evidence. It composes a siren's song challenging several of the court's rulings. But Green's arguments are off-key, and Green winds up singing the blues.

For the most part, Green's vision of improperly admitted evidence involves the prohibition against the introduction of hearsay testimony. By definition, hearsay is an out-of-court statement " offer[ed] in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c)(2). " It follows from this definition that a witness's first-hand account of an out-of-court statement, not offered to prove the truth of that statement, is not inadmissible hearsay."

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United States v. Walker, 665 F.3d 212, 230 (1st Cir. 2011). Put another way, an out-of-court statement is not hearsay if it is relevant regardless of its truth (say, to show state of mind). See 2 McCormick on Evidence § 246 n.6 (Kenneth S. Broun ed., 7th ed. 2013). As we explain below, the bulk of Green's hearsay objections fail because the challenged statements were offered and admitted for a non-hearsay purpose.

Green's first plaint targets the admission of the testimony of a MilSal senior manager, Robert Gregg Koefer, relating that AAFES's buyer (Atherton) had " conveyed to [MilSal] an interest in . . . set[ting] up [certain] vendors on a direct basis" and that the transition would take less than two weeks. The record makes manifest that these statements were admitted not for the truth of their contents -- that AAFES was interested in converting to a direct-sales model and could do so within two weeks -- but to show that Koefer had a non-culpable state of mind when soliciting vendors. See Greensleeves, Inc. v. Smiley, 68 A.3d 425, 434 (R.I. 2013). Indeed, the district court gave a limiting instruction directing the jury to consider Koefer's statements solely for this non-hearsay purpose.

Green next challenges the admission of certain testimony by a former MilSal marketing executive (Rick Fox) about Fox's conversation with Vaughn concerning Brigade's financial information. Pertinently, Fox testified that Vaughn implored him to " keep [the information] confidential" because " the tactical industry is extremely small" and Vaughn did not want to " tarnish" his relationships within the industry. Viewed in context, it is readily apparent that this testimony was admitted for a non-hearsay purpose: to show Fox's state of mind; that is, that he believed that MilSal was entitled to see and use, but not disclose, the information furnished by Vaughn. The truth of Vaughn's statements -- that the industry is small and that releasing the information to others might tarnish his reputation -- was not the issue; the statements were admitted only to illuminate Fox's state of mind and, thus, to rebut the theory that MilSal knowingly used filched information to solicit Green's suppliers.

We likewise reject Green's complaint about the admission of testimony from one of Darling's principals (Todd Silver). This witness testified that a Brigade competitor seeking Darling's business had expressed its " understand[ing]" that Brigade was experiencing " problems" such as " not-in-stock" situations.

Rumors may be admitted, without regard to their accuracy, to show their motivating effect on the listener. See, e.g., Smith v. Wilson, 705 F.3d 674, 679 (7th Cir. 2013); United States v. Worman, 622 F.3d 969, 974-75 (8th Cir. 2010). MilSal argues persuasively that it offered this testimony for a non-hearsay purpose: to show that Darling was considering offers by Brigade's competitors and to explain Darling's reasons for defecting. This interpretation is plausible. Regardless of whether Brigade was actually experiencing problems, Darling might well have been influenced by the rumors to that effect.[1] Given this plausible non-hearsay purpose, we are ...


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